Wholly state-owned credit institutions and those in which the State holds over 50 percent of charter capital would be subject to assessment, according to a draft circular recently revealed by the Ministry of Finance.
Specifically, the assessment of a credit institution would be based on the following five criteria:
The first criterion is revenues which is determined according to the balance in the bookkeeping accounts of the credit institution. As specified by the draft, a credit institution would be graded A if its revenues are equal to or higher than the assigned figures, graded B when it earns at least 90 percent of the planed revenues, and graded C when its total revenues are lower than 90 percent of the assigned figures.
The second one is after-tax net profits from business activities after setting aside the credit risk provision and paying corporate income tax. A credit institution would be graded A if its profits are equal to or higher than, graded B when it makes at least 90 percent of, and graded C when its profits are lower than 90 percent of, the planned profit targets.
The third criterion is the bad debt ratio and potentially irrecoverable debt ratio. A credit institution that has a bad debt ratio of under 3 percent and a potentially irrecoverable debt ratio of under 1.5 percent and lower than the planned ones would be graded A. Meanwhile, a credit institution that has a bad debt ratio or potentially irrecoverable debt ratio of over 110 percent of the assigned figures or a bad debt ratio of over 3.5 percent and a potentially irrecoverable debt ratio of over 2 percent would be graded C. Other credit institutions would be graded B.
The fourth and fifth criteria are law observance and effective provision of public utility products and services. A credit institution would be graded A, B and C based on their satisfaction of these criteria.- (VLLF)